Employee Misclassification: Are You a Victim?

Posted on Mar 23, 2015 6:30am PDT

In 2011, Levi Strauss made national news when the company agreed to pay
more than one million dollars in back wages to employees it misclassified
as exempt from overtime pay. Unfortunately for a
non-exempt employee in San Jose, many companies struggle with the definition of exempt and non-exempt
employees. While the rules governing this type of employment law are complex,
the practical implications of these classifications are rather straightforward.

Tests for classification

The Federal Labor Standards Act outlines three tests for classifying an
exempt employee and a non-exempt employee. In most cases, the employee
must satisfy all three tests to meet the definition of exempt. First,
an employee is considered exempt if he or she earns more than $100,000
per year. Employees earning less than $23,600 per year are classified
as non-exempt. The second requirement is the salary basis test, which
classifies employees as salaried if they receive a guaranteed minimum
amount of money for weekly work. The final test is the duties test, which
looks at the actual job tasks and how the position fits into the employer’s
overall operations.

Reclassification of employees

Identifying misclassified employees is just the first step in solving this
employment law issue. The employer needs to calculate a new hourly wage
rate and compensate the employees for any overtime wages owed. If the
employee salaries were already quite high, it may be difficult to convert
those to an hourly rate that isn’t considerably higher than competitive
market rate. In this type of situation, it may be useful to meet with
an employment attorney about reclassifying employees and providing compensation
for back wages.

Management training

Employers may need to
meet with an employment attorney to calculate the amount due to each misclassified employee and benchmark
a competitive new hourly rate. This ensures that the affected employees
don’t earn any less than they did with their exempt statuses. Next,
employers should train managers on workplace rights for hour employees
and how to educate their employees on rights regarding overtime wages.
An attorney can help the
employer reach a settlement for back pay with the affected employees.